Why Not to Stay as a Sole Proprietor

Why Not To Stay As A Sole Proprietor  |  Jason McWhorter  |

Most business owners in the United States are sole proprietors. This means that they have not incorporated their business or registered it as a Limited Liability Company (LLC). While this may work for some people whose business is small or more of a hobby, it is very dangerous for most.

First, a business owner who has not registered his or her business is running the risk of unlimited personal liability. What this means is if you ever cause harm to a customer, and that customer files a lawsuit against you, there is no limit to how much of your personal assets they can take from you. This includes your house, your car, your retirement fund, etc. However, should a business owner incorporate their business or register it as an LLC, they are personally protected from such a disaster. A customer can still file a lawsuit against your company, but you stand to lose very little in comparison to your life savings. And while each state is different, the cost to incorporate is usually no more than a few hundred dollars. Your life savings versus a few hundred dollars is a “no brainer” for most people. Therefore, we strongly suggest you consider protecting yourself if you plan to operate your business for a long time and especially if someone could get injured in your line of work.

Why Not To Stay As A Sole Proprietor

Secondly, incorporating your business keeps it safe from others taking away your hard work. For example, if you have been running a great lawn care company for several years but have not registered your business, another person can come along, register as a corporation and name you are already using. Furthermore, since they filed the name first with the state, they can stop you for using your company name even if you can prove you were using it first!

This is why we suggest it is smarter to be proactive, and not reactive to getting off on the right foot and consider making your company a formal entity.

Feel free to contact Dragonfly Business Solutions to discuss your business needs. We can walk you through every step of the way to maximize your business effectiveness. Call us today at 800.975.1764. You will be glad you did!